Thursday, January 17, 2013

Why Is Net Metering Under Attack?

The utilities’ net metering math doesn’t add up.

Customer-sited (or "rooftop") solar provides less than 0.01 percent of the U.S. energy supply -- but the market is growing rapidly, and as costs continue to decline, solar is reaching homeowners of all incomes. This is cause for alarm among utilities that have been providing electric service in essentially the same way for over a century.

A total of 5.9 gigawatts of PV is now in operation in the U.S. That’s more than 271,000 installations, many of which are on customers’ rooftops. GTM Research forecasted that 3.2 gigawatts of PV solar was installed nationwide in 2012, up from 1.9 gigawatts installed in 2011. If new solar capacity added in the fourth quarter of 2012 matches GTM Research predictions, solar PV will see a 70 percent increase in installation growth in 2012 compared with 2011.

Key to solar’s growth is an arrangement known as net metering. Currently in place in 43 states and the District of Columbia, net metering allows a solar customer’s electric meter to “spin backwards” when she generates more solar energy than she uses, ensuring fair credit for the clean power delivered to the grid.

Utilities across the country are experiencing major shifts in the way customers use energy, and that’s making them nervous. Growth in electricity demand is slowing across the country: the U.S. Energy Information Administration projects electricity use will increase at the anemic rate of 0.7 percent per year through 2035 -- down from the usual 2 percent to 3 percent growth per year. Beyond a reduction in sales, utilities are worried about retaining customers as solar costs drop like a rock, a situation that could be further exacerbated now that cost-effective micro-storage is predicted to be only a few years away.

The writing is on the wall: clean and reliable rooftop solar, energy efficiency, and smart grid technologies are here to revolutionize the grid. But instead of looking to get ahead of these trends, many utilities are digging in and defending their business-as-usual approach. These utilities make a guaranteed rate of return on infrastructure, including power plants and transmission lines. As a result, utilities continue to invest in conventional dirty energy resources that may become obsolete well before the plants will be retired.

Some utilities are looking to slow the growth of rooftop solar by claiming that net metering shifts big costs onto non-solar ratepayers. In a recent one-sided article in Bloomberg, for example, the three big California utilities alleged net metering is costing non-solar ratepayers $1.3 billion, but gave no details on how they arrived at that staggeringly high number.

The fact is, the utilities’ net metering math doesn’t add up. The calculations inflate the cost side of the equation, while leaving a rather important piece out of the cost-benefit analysis: the benefits. By using fuzzy math to put net metering on trial in the press, these utilities hope to convince policymakers to put a halt to common-sense solar policies.

What’s needed is a rational dialogue among the stakeholders, and an accurate and comprehensive look at the economic impacts of net metering, considering all the costs and benefits. To that end, Vote Solar commissioned Crossborder Energy, a consulting firm, to conduct a new analysis for ratepayers of the three big California utilities. The results show that net metering actually provides a system-wide net financial benefit to non-solar ratepayers, not a cost as the utilities assert.

In total, the non-solar ratepayers of all three IOUs will save more as more net metered systems are installed, up to about $92 million per year once we reach the current 5 percent net metering cap.

Why are these numbers so different from the utility claims? Well, not only did Crossborder Energy analysts look accurately at the costs side of the ledger, but they also counted all the well-documented benefits that net-metered generation brings to the grid. Those benefits include avoiding the cost of purchasing expensive conventional plants and fuel, reducing the need for investments in wires, reducing the power lost over those wires, and avoiding costs associated with meeting carbon and renewable energy requirements.

Net Metering's benefits to the grid outweigh the lost revenue from net metering bill credits. It’s actually solar customers as a group that are subsidizing non-solar customers as a group.

For many utilities, rooftop solar represents a threat to traditional business models. But the people want it, the grid needs it, and it’s helping us take on some of our greatest challenges.

Utilities will have to adapt to a 21st-century energy landscape with new regulatory structures and initiatives, innovative business models, and modernized practices making way for ubiquitous distributed energy.